Personal Finance

Zero-Interest Credit Cards: The Ultimate Financial Hack or Financial Grenade?

Customer using credit card for payment to owner business. cashless technology and credit card payment concept. through the internet for convenience.
Atthapon Niyom / Shutterstock.com

Zero-interest credit cards may be tempting to some individuals who can’t quite make the full payment on their statement in any given month. Undoubtedly, those who put things on credit with the intent to worry about matters in the future may find them to be a pretty nice “financial hack” of sorts.

That said, I’d argue that there are drawbacks of promotional low-rate periods. On the surface, a “0% APR” looks fantastic. But what happens once the promo rate expires? The odds are that you’ll be paying interest on outstanding balances that’re in the ballpark, along with most other credit cards out there. And, as you’re probably aware by now, such rates are high, really high.

Of course, such zero-rate promotions can work for consumers who are running into near-term cash flow issues. Indeed, for someone who expects to be on better financial footing in a few months down the road, saving in interest payments can make the zero-rate cards more than worth the while. In any case, for most folks, I’d opt for a card that has the best sustained perks and benefits, rather than leaning too heavily on promotions.

Key Points

  • Zero-rate cards can make sense for some, but do think about what happens after the higher rate kicks in.

  • The right cash back credit card can earn you hundreds, or thousands of dollars a year for free. Our top pick pays up to 5% cash back, a $200 bonus on top, and $0 annual fee. Click here to apply now  (Sponsor)

Zero-rate cards sound great on paper. But prospective applicants should think beyond the promo period.

At the end of the day, it is possible to have one too many credit cards. More applications could weigh heavily on your credit score. And with more cards to manage, the odds of missing or forgetting a payment are that much higher. Of course, promotional balance transfers and all the sort can help improve upon management of credit card debts.

As always, whether zero-rate cards are a “financial hack” or “grenade” depends on who you are, your financial situation, and what you plan to do with them. For responsible users who will be able to manage the debts as they eventually come due, zero-rate cards can make sense, provided you intend to change your spending patterns once higher rates come online.

For irresponsible users who will be enticed to spend more and let the credit card debts sit until the promotional zero-interest rate expires, such a card can really hurt your credit score where it hurts. Additionally, you’ll need to read the fine print.

There are ways to score better, sustained returns from a credit card

Undoubtedly, credit cards with temporary periods of zero rates may not have the best permanent perks and benefits. For those who tend to pay all (or at least most) of their credit card balances every month, perhaps it’s better to opt for the promos that entail a generous amount of points or cash back.

Undoubtedly, you should crunch the numbers to find out which card will allow you to score the biggest return on the money you’d spend in any given year. Some cards are a better fit for travellers, while others are better for families with high weekly grocery bills. And, of course, there are Millennial-themed cards that grant the most perks and points for experiences and fine dining.

The best way to know which card is a better fit for you is to evaluate the list of benefits and the likely return you’d get based on your own personal spending habits. As enticing as zero-rate promos are, they don’t last long. It will not take long before that zero-rate card turns into a normal card, one you may not think is as worth the while any longer.

Are You Still Paying With a Debit Card?

The average American spends $17,274 on debit cards a year, and it’s a HUGE mistake. First, debit cards don’t have the same fraud protections as credit cards. Once your money is gone, it’s gone. But more importantly you can actually get something back from this spending every time you swipe.

Issuers are handing out wild bonuses right now. With some you can earn up to 5% back on every purchase. That’s like getting a 5% discount on everything you buy!

Our top pick is kind of hard to imagine. Not only does it pay up to 5% back, it also includes a $200 cash back reward in the first six months, a 0% intro APR, and…. $0 annual fee. It’s quite literally free money for any one that uses a card regularly. Click here to learn more!

 

Flywheel Publishing has partnered with CardRatings to provide coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.

AI Portfolio

Discover Our Top AI Stocks

Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.

You can follow him investing $500,000 of his own money on our top AI stocks for free.